Cryptocurrency may be the safest instrument for transacting values between anonymous users. However, storing and trading cryptocurrencies can be quite risky. As this is a digital currency, there are no problems that usually occur with traditional currencies, but it still has some issues that are unique to the fintech industry.
Where to store coins?
The most common way of storing coins is a software wallet. Digital wallets are undoubtedly user-friendly and practical, but how safe they are? If you choose to store your coins on the desktop computer, then they are as safe as your computer. In general, you protect your software wallet the same way you protect the data on your computer. It is advised to be a little more cautious when surfing the Internet and to avoid saving passwords in non-encrypted files on the same device where your wallet is located.
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It would be ideal to store your passwords offline and not to keep them on your computer at all. You should also consider setting up your wallet on the device that you're not usually using on a daily basis, for surfing and downloading.
When it comes to offline wallets, hardware wallets are the best possible solution. Hardware wallets are mobile and specially designed for storing cryptocurrencies. They are USB devices with simple and safe software, having several layers of cryptographic protection.
Best Bitcoin Wallets
There are several of bitcoin wallets, and they all differ regarding the security mechanism to ensure the safety of private keys.
Bitcoin wallets exist in 5 forms:
- desktop wallets
- mobile wallets
- online wallets
- hardware wallets
- paper wallets
Some types in this list may overlap or even be used in combination with each other.
1. Desktop wallet
Bitcoin desktop wallets offer the highest level of security when it comes to bitcoin storage. You need to download the software to your computer, and then you can perform bitcoin transactions from a desktop, so it is understandable if this option is not the most practical for some people. It can also be a little confusing for bitcoin newbies.
Bitcoin Core is the first and original wallet in the market. Using this one means having control over both public and private keys, which apparently ensures safe storage. However, Bitcoin Core also needs a lot of space as the software has a data on every bitcoin transaction ever performed. According to the official page, you will need at least 65GB of free space.
As it is just over 30MBs, Multibit is a lightweight desktop bitcoin wallet. Many people choose to use it together with KeepKey wallet, a USB device that requires the manual confirmation before any bitcoins transaction.
Armory is one of the most popular options for those who wish to use a desktop bitcoin wallet. Private keys are stored offline, which means that only the person with the access to the physical location of the computer can steal bitcoins.
2. Mobile Wallets
Bitcoin mobile wallets are not only easily accessible and practical but may also include other layers of protection. It is wise to keep only a small amount of bitcoins in mobile wallets and to keep the rest in some of the more secure options. All the options on this list are also available for Android and iOS users.
Mycelium is a safe option for secure bitcoin storage on mobile devices. Having a "bank-grade security," it boasts Hierarchical Deterministic wallets, private key deletion and "watch only" accounts.
It is a full-fledged bitcoin service provider that offers both online and mobile secure bitcoin wallets. The thing that makes Wirex different from the rest is its ease of use while not compromising security. Users get multi-signature wallets and can enable 2-factor authentication (2FA) for both the app and Wirex-linked email address, which makes third-party breaches quite hard.
This one is famous for its vault and security. Xapo actually combines cold storage and multi-sig technology in order to keep users’ bitcoins safer. The servers are kept as secure as possible.
3. Online wallets
Online bitcoin wallets are easily accessible on the web via any device that can be connected to the Internet. It is undoubtedly easier and faster to make transactions via online wallets regarding its accessibility. Phishing, malware or hacking of digital security makes it easy for hackers to steal bitcoins from online wallets. There is also the failure of two large bitcoin exchanges, Mt Gox and Bitfinex, which makes people wary of this kind of service. Although some of the wallets from the list have a high reputation, it is still recommended to keep larger amounts of bitcoins in other types of wallets.
Blockchain.info is one of the most popular websites among those who want to perform and check bitcoin transactions. This is a good choice because of its ease of use, multi-country support, and cross-platform capability. Blockchain.info is also available for desktop and mobile app.
BitGo is considered a leader in blockchain security world. This one is good for individuals and businesses who prefer some near-instant transactions. A bitcoin transaction needs between from 3 to 6 confirmations, which can take at least 30 minutes of your time. Choosing a BitGo Instant and its zero-confirmation technology, users can make transactions more secure and fast.
Many bitcoin holders wish to check bitcoin wallets multiple times a day to reassure themselves their bitcoins are still where they should be. This constant login-logout might be unsafe if it's done over unsecured WiFi.
4. Hardware Wallet
This is a good choice for many bitcoin holders who wish to keep significant quantities of bitcoins. Hardware bitcoin wallets are known for being user-friendly and portable.
The biggest fear of most bitcoin holders is the unknown transaction which depletes all of their bitcoin savings. KeepKey is made to help them with this problem. Users must approve each outgoing transaction on the KeepKey device, manually. Private keys remain in the device, which is also PIN-protected in case it is stolen.
Endorsed by many key Bitcoin community leaders, Trezor is small wallet which is quite simple to use. It features security against malware and disaster recovery in case of theft or loss.
This is the smallest and most effective option. Ledger Nano has a few variations for users to choose. Everyday users can select between Ledger Nano or Ledger Nano S. This is the first hardware wallet that can also store Ether (ETH).
5. Paper Wallet
Bitcoin paper wallets are very safe against hackers as the bitcoins are being managed offline. Users have control over bitcoins all the time as they keep their private keys. The problem with this option is in storage. Paper can be easily destroyed, torn, fade or in the worst case, lost. Unlike hardware wallets, there is no particular recovery mechanism for paper wallets. This is something every newbie should keep in mind if choosing this option.
Users can print resistant paper wallets to keep their bitcoins offline. This website offers additional security tips, designs, and supplies. It even has a helpful video that shows you how to use this paper wallet.
BitAddress.org is a free service that can generate bitcoin paper wallets easily.